Correlation Between Jack Henry and International Business

Can any of the company-specific risk be diversified away by investing in both Jack Henry and International Business at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Jack Henry and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jack Henry Associates and International Business Machines, you can compare the effects of market volatilities on Jack Henry and International Business and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Jack Henry with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jack Henry and International Business.

Diversification Opportunities for Jack Henry and International Business

0.03

Correlation Coefficient

Jack Henry  International Business

Significant diversification

The 3 months correlation between Jack and International is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Jack Henry Associates and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Jack Henry is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Jack Henry Associates are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Jack Henry i.e., Jack Henry and International Business go up and down completely randomly.

Pair Corralation between Jack Henry and International Business

Given the investment horizon of 90 days Jack Henry is expected to generate 4.05 times less return on investment than International Business. But when comparing it to its historical volatility, Jack Henry Associates is 1.43 times less risky than International Business. It trades about 0.03 of its potential returns per unit of risk. International Business Machines is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  21,879  in International Business Machines on December 30, 2024 and sell it today you would earn a total of  2,521  from holding International Business Machines or generate 11.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Jack Henry Associates  vs.  International Business Machine

Jack Henry Associates

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jack Henry Associates are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Jack Henry is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

International Business

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Jack Henry and International Business

The main advantage of trading using opposite Jack Henry and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jack Henry position performs unexpectedly, International Business can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in International Business will offset losses from the drop in International Business' long position.

The idea behind Jack Henry Associates and International Business Machines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.